Question

QUESTION 17 If the demand for public transit is very price elastic, we would expect that subsidizing the price would increase ridership more than if demand were price inelastic increase ridership less than if demand were price inelastic shift the demand curve for mass transit to the down/left shift the demand curve for mass transit to the up/right QUESTION 18 Consider a fictitious California winery, Oakwood that produces a high-quality Cabernet. Currently Oakwood sells for $25 per bottle and at that price the winery sells 1000 cases. If the own-price elasticity of demand for Oakwood Cabernet is - 5, then an increase in price from $25 to $27.50 would increase quantity demanded by 50 cases decrease quantity demanded by 500 cases decrease quantity demanded by 50 cases decrease quantity demanded by 100 cases QUESTION 19 Burning carbon-based fuels produces a negative externality in the form of pollution. Therefore, without any government intervention, the market _ To correct for this market failure, government could overproduces goods/services that use carbon-based fuels, subsidize the purchase of carbon-based fuels underproduces goods/services that use carbon-based fuels, subsidize the purchase of carbon-based fuels underproduces goods/services that use carbon-based fuels, tax the purchase of carbon-based fuels overproduces goods/services that use carbon-based fuels, tax the purchase of carbon-based fuels

Answer 1

17) A. If demand is price elastic and then govt subsidise good then price decreases and ridership increases more than if demand is inelastic.

18)Ans is A

increase in price from 25 to 27.5 is 10% increase

Ed=-0.5 then demand decreases by 5%

Thus quantity demanded decreases by 50 units.

19)ans is D

Market overproduces Goods and services in case of negative externality. To correct this externality, government can impose a tax